Estimating a Statewide Transportation Funding Shortfall Using MPO Long Range Plans


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This paper was presented at the 89th Annual Meeting of the Transportation Research Board, and will be published in a 2010 issue of the Transportation Research Record. The topic of the paper is the methodology and results of a project estimating the transportation infrastructure funding shortfall in the state of Florida. To estimate the shortfall, financial information was extracted from all 26 MPO long range plans. This yields a $62.5 billion shortfall in metropolitan areas of Florida over the next 20 years.

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Estimating a Statewide Transportation Funding Shortfall Using MPO Long Range Plans

  1. 1. Alexander Bond and Jeff Kramer    1  1  Estimating a Statewide Transportation Infrastructure Funding Shortfall 2  Using Metropolitan Planning Organization Long Range Plans 3  4  5  6  Corresponding Author: 7  Alexander Bond, AICP 8  Center for Urban Transportation Research 9  University of South Florida 10  4202 E. Fowler Ave, CUT 100 11  Tampa, FL 33620-5375 12  Phone: (813) 974-9779 13  Fax: (813) 974-5168 14 15  16  17  Jeff Kramer, AICP 18  Center for Urban Transportation Research 19  University of South Florida 20  4202 E. Fowler Ave, CUT 100 21  Tampa, FL 33620-5375 22  Phone: (813) 974-1397 23  Fax: (813) 974-5168 24 25  26  27  28  29  30  Submission Date: 11/5/2009 31  32  Word Count: 4,236 (3,237 text, 3 tables, 1 figure) 33 
  2. 2. Alexander Bond and Jeff Kramer    2  1  ABSTRACT 2  The information contained in metropolitan planning organization (MPO) long range plans (LRTP) can be 3  amalgamated to estimate a statewide, metropolitan, twenty-year transportation infrastructure funding 4  shortfall. This article describes the methodology used to calculate such a shortfall in Florida, using 5  information from all twenty-six MPOs in the state. Information on the cost of projects needed and the 6  dollar amount of anticipated revenue was extracted from each MPO plan. The difference between the two 7  figures is the shortfall from that MPO. The methodology included steps taken to normalize the data for 8  differing plan lengths, analysis base years, and rates of inflation. The results of the study show Florida is 9  expected to experience a shortfall of $62.5 billion over the period 2005-2025. This is an annualized 10  shortfall of $3.1 billion, and represents a total statewide shortfall of 42.9%. The study concluded that 11  Florida’s shortfall has been increasing since the study was first conducted in 1997. Further, the data 12  suggests the rate of increase may be accelerating. Shortfalls were not uniform from MPO to MPO. In 13  fact, shortfalls were observed to be smaller in MPO regions that had slower population growth rates or 14  dedicated sources of local funding such as impact fees or fully-enacted local option gas taxes. Florida’s 15  transportation leaders have found this project useful in communicating the funding circumstances in the 16  state. A statewide shortfall can help decision-makers see how dramatic the shortfalls are, and direct 17  available resources toward urban areas. 18 
  3. 3. Alexander Bond and Jeff Kramer    3  1  INTRODUCTION 2  In 2007, the Florida Metropolitan Planning Organization Advisory Council (MPOAC) undertook a study 3  to estimate the statewide metropolitan transportation funding shortfall over the next twenty years. This is 4  the third study in the series, and each edition has proven beneficial when communicating with state and 5  local decision-makers. In addition, the study of statewide funding shortfalls using metropolitan planning 6  organization (MPO) information has led to a number of methodological improvements in MPO planning 7  practices across the state. 8  This study examined the statewide funding shortfall in metropolitan areas of Florida. Information 9  was drawn from the long range transportation plans (LRTPs) of the state’s twenty-six metropolitan 10  planning organizations. Taken together, the expected shortfall of all MPOs in a state yields a snapshot of 11  transportation needs and shortfalls in metropolitan areas of the state (1). 12  13  BACKGROUND 14  MPOs must be established in any area with more than 50,000 people, so they are an ideal source for 15  information on metropolitan areas of the state. Federal law requires MPOs to adopt a financially-feasible 16  plan that extends at least twenty years into the future. This plan must cover all surface transportation 17  modes. The law also prescribes eight planning factors that must be considered in the document. In the 18  programming phase, projects are selected from the plan for inclusion in the metropolitan Transportation 19  Improvement Program (TIP), which is a four to five year work program. The contents of the TIP are 20  required to be included in the statewide TIP (STIP). 21  Many MPO plans share a similar structure. The typical plan begins with a statement of guiding 22  principles, goals, and objectives. This policy guidance helps define the next section, which is an analysis 23  of needs. Often, the MPO will use a travel demand model to help estimate future demand. Most MPOs 24  look at the existing network, demographic trends, and projected demand to establish a pool of needed 25  projects. Many MPOs publish an official “need plan,” but this is not a requirement of Federal law. If 26  MPO does not adopt an official need plan, during the course of the planning process, a list of needed 27  projects is produced. The needs pool is compiled without regard to project cost, and represents the 28  MPO’s “wish list” if money for transportation projects was unlimited. 29  In Florida, MPOs have voluntarily agreed to adopt a needs plan that includes projected cost for 30  each project. In other states, a needs plan may not be adopted, or the projects contained in the list may 31  not have had costs assigned to them. In order for this methodology to apply to states other than Florida, 32  all MPOs must have crafted a list of needed projects and assigned costs for each project. 33  After the needs list is crafted, the list is subjected to iterations of scenario building to select 34  projects for inclusion in the cost feasible plan. The list of needed projects is screened for engineering 35  problems (physical constraints), environmental impacts, other policy constraints, and in some cases, air 36  quality impacts. The list is also screened for projects that may violate National Environmental Protection 37  Act (NEPA) standards, civil rights, Environmental Justice standards, or damage historic and cultural 38  resources. However, the most limiting factor is anticipated revenue. The MPO will use revenue 39  projections to determine how much money will be reasonably available from all sources—Federal, state, 40  and local. The MPO strives to build the projects that offer the greatest return on investment. In practice, 41  the price of the cost feasible project list is equal to the expected available revenue. However, some MPOs 42  choose not to allocate every dollar of available revenue. 43  Florida has twenty-six MPOs, the highest in the nation. Many of Florida’s MPOs are organized 44  around entire counties. Today, Florida’s MPOs cover about 47% of the state’s land area and more than 45  90% of the population. Figure 1 shows the planning area boundaries of MPOs in the state. Florida’s 46  MPOs are provided revenue estimates by an inter-agency cooperative effort between the Department of 47  Revenue and the Department of Transportation. This effort (dubbed the Revenue Estimating Conference) 48  uses historical data, current economic conditions, and future projections to estimate the amount of 49  revenue available in the state. Estimates are provided for each State DOT District, each MPO, and each 50  local government that has enacted statutorily-authorized local option taxes. MPOs may also collect 51  revenue information from transit agencies, local governments, toll authorities, and modal authorities.
  4. 4. Alexander Bond and Jeff Kramer    4  1  2  3  FIGURE 1 MPOs in Florida. 4  5  METHODOLOGY 6  To arrive at the metropolitan 20-year shortfall, the research team collected financial and project 7  information from MPO long range transportation plans in Florida. The first piece of needed data was the 8  total projected cost of each MPO’s needs plan. The second piece was the reasonably anticipated 9  available revenue. As previously noted, the amount of anticipated revenue is roughly equivalent to the 10  dollar amount to build the projects shown in the cost feasible plan. The basic formula for calculating the 11  shortfall was to subtract the dollar amount of available revenues from the price of the needed projects list. 12  However, not all plans in the state could be directly compared due to differences in plan length and base 13  year of analysis. Each MPO’s shortfall needed to be recalculated using the following five-step process: 14  15  Step 1- Determine the Shortfall of Each MPO 16  The funding shortfall for each MPO is the difference between the cost of all projects in the needs plan and 17  the amount of revenue anticipated over the life of the plan. The cost of the needs plan includes expenses 18  slated for both capital and operations projects, although not all MPOs listed costs related to operations. 19  The expected revenue includes all funding sources listed in the plan, including local and toll-related 20  sources. 21  22  Step 2- Adjust to a Common Year 23  In order to compare and total the shortfall from each plan, it was necessary to normalize the results into a 24  common comparison year. The year selected was 2005, because that was the most frequently 25  encountered base year among plans in the state. The base year of plans varied from the year 2000 through 26  2006.
  5. 5. Alexander Bond and Jeff Kramer    5  1  The inflation factor applied was the US Department of Commerce’s Consumer Price Index-All 2  Urban Consumers (CPI-U), which tracks the inflation of the US Dollar in urban areas over 50,000 people. 3  The CPI-U is calculated using the same component data as the oft-cited Consumer Price Index (CPI). 4  However, the CPI-U uses only data collected from Census tracts located in metropolitan areas. The CPI- 5  U was chosen over other inflation measures because the inflation factor more accurately reflected the cost 6  of materials and labor in urban areas, which is where MPOs are located. In practice, the CPI-U closely 7  mirrors the standard CPI, varying by less than a tenth of a percent during each year of the study. 8  The CPI-U has a base year of 1982, when it equaled 100.0. Each year after that, the CPI-U goes 9  up in lockstep with the inflationary forces on urban goods. The CPI-U from a given year can be 10  compared with the CPI-U from a different year to determine the percentage difference between the two. 11  The percentage difference between two years’ CPI-U is the same as the percent adjustment required to 12  bring two dollar figures into a common year. Table 1 below shows the base year, the number of plans in 13  those base year dollars, the CPI-U, and the percent adjustment needed to convert shortfalls from their base 14  year into 2005 dollars. 15  16  TABLE 1 Base Year of Plans and Adjustment Number of  Cumulative Percent  CPI‐U Base Year Plans Adjustment 2006 2 201.6 ‐3.12 2005 9 195.3 0.00 2004 8 188.9 3.39 2003 3 184.0 6.14 2002 1 179.9 8.56 2001 0 177.1 10.28 17  2000 2 172.2 13.41 18  19  Step 3- Annualize the Shortfall 20  Federal law requires plans to look at least twenty years into the future. However, there is no requirement 21  that plans must be exactly twenty years long. Some documents have longer time horizons. Other plans 22  do not begin immediately, instead they begin in the year after the TIP currently in effect expires. Because 23  of the wide variety of plan effective dates, it was necessary to annualize the shortfall figures from each 24  plan document. For each LRTP, the shortfall amount from step 2 was divided by the number of years the 25  plan was in effect. This results in an annualized shortfall. 26  27  Step 4 - Multiply by Twenty 28  After the shortfall for each MPO has been put into a common year and annualized, it is ready for the final 29  calculation step. The first step is to multiply the annualized shortfall by twenty. This gives us a shortfall 30  for one MPO that estimates what the figure would be if the plan was exactly twenty years long and stated 31  in a common base year. 32  33  Step 5- Repeat for Each MPO and Total 34  Repeat steps 1 through 4 above for each MPO in the state. Since each shortfall is normalized to match its 35  peers, they can be directly compared to the shortfall of other MPOs. Shortfalls can then be totaled, 36  averaged, and projected into the future. The final step in calculating a statewide shortfall is to total the 37  shortfalls of each MPO in the state. This produces a statewide, 20-year, metropolitan funding shortfall. 38  39  A Hypothetical Example 40  A hypothetical example will help demonstrate the methodology applied during this study. Assume that 41  the hypothetical Key West MPO adopted their LRTP in 2002. This plan is effective through 2025, and 42  uses 2002 as the base year of analysis. The adopted Needs Plan would cost $300,000,000 in 2002 dollars.
  6. 6. Alexander Bond and Jeff Kramer    6  1  However, the MPO estimates that only $200,000,000 (in 2002 dollars) will be available over the course of 2  the plan. This means there is a $100,000,000 shortfall in base year dollars. Viewed another way, the Key 3  West MPO must trim $100 million worth of projects from its needs plan in order to match anticipated 4  revenue. 5  Since the plan’s base year was 2002, the shortfall figure must be converted into 2005 dollars. If 6  the shortfall is not converted, the Key West MPO’s shortfall cannot be compared to its peers because 7  dollars were worth more in 2002 than in 2005. The CPI-U for the year 2002 was 179.9. In 2005, the 8  CPI-U had increased to 195.3. The difference between the two is 15.4, which is a change of 8.56 percent. 9  To convert the Key West MPO plan, the shortfall must be increased by 8.56 percent. Since the shortfall 10  was $100,000,000 in 2002 dollars, the adjusted shortfall would be $108,650,000 in 2005 dollars. 11  The Key West MPO’s shortfall still cannot be compared, because its plan does not have the same 12  length as others in the state. The Key West MPO has a plan that is twenty-two years long, because it was 13  adopted in 2003 and has a horizon year of 2025. Other MPOs have effective plan lengths as short as 14  fifteen years, some as long as twenty-five years. To compare, we must make all of the shortfalls appear 15  as though they are of equal length—twenty years. We divide the inflation-adjusted shortfall by the 16  number of years in the plan, which is 22 years. This gives us an average annual shortfall of $4,938,636. 17  Then, we multiply the average annual shortfall by 20 years. This gives us an inflation-adjusted, twenty- 18  year shortfall estimate for the Key West MPO of $ 98,772,727. This number can now be totaled with 19  others to create the statewide shortfall. 20  21  FINDINGS 22  There is a large and growing shortfall between transportation needs and reasonably available revenues 23  identified in MPO areas of Florida. The twenty-year statewide funding shortfall is estimated to be $62.5 24  billion in 2005 dollars. This is a statewide shortfall of 42.9 percent (total statewide needs divided by total 25  statewide revenue). Furthermore, this is an annualized statewide shortfall of just over $3.1 billion per 26  year. The shortfall includes roadway, transit, and bike/pedestrian networks. 27  This study has been performed twice before, in 1997 and 2002. Data from these studies can be 28  used to track the growth of the statewide shortfall over time, and the results of the comparison are shown 29  in Table 2. Since 2002, the shortfall has increased from an inflation-adjusted $42.7 billion to $62.5 30  billion, an increase of 46 percent. In 1997, the inflation-adjusted shortfall was $29.8 billion. This is a 31  cumulative increase of 110% in ten years. 32  33  TABLE 2 Growth of Statewide Shortfall Review  Shortfall in  Percent  Cumulative  Year 2005 Dollars Growth Growth 1997 $29.8 Billion ‐‐ ‐‐ 2002 $42.7 Billion 43% ‐‐ 2008 $62.5 Billion 46% 110% Note: The 1997 and 2002 reviews have been adjusted into 2005  dollars to enable comparison.  The first review revealed a  shortfall of $22.3 billion in 1995 dollars.  The second review  34  revealed a $37.7 billion shortfall in 2000 dollars.    35  36  When shortfalls are compared, it becomes clear that some MPO areas are projecting a more 37  challenging fiscal environment than others. Table 3 compares the 2008 shortfall estimate to previous 38  estimates as expressed in 2005 dollars. Since 2002, the shortfall has increased by 46 percent. Between 39  1997 and 2008, the shortfall grew by a cumulative 110 percent. Some of Florida’s oldest and largest 40  metro areas rank near the bottom of the list in terms of percentage shortfall–that is, they expect to be able 41  to fund more of their transportation needs. The Pinellas MPO (St. Petersburg/Clearwater), Miami-Dade
  7. 7. Alexander Bond and Jeff Kramer    7  1  MPO, and METROPLAN Orlando all project shortfalls of less than 15%. Meanwhile, newer MPO areas 2  like the Okaloosa-Walton TPO (Destin) and the Lee County MPO (Ft. Myers) forecast a shortfall greater 3  than 60%. 4  5  6  7  TABLE 3 Percent Shortfall by MPO 20‐year Shortfall  Percent  MPO (millions) Shortfall Okaloosa‐Walton $6,399.2 85.3% Gainesville $359.1 84.4% Martin & St. Lucie $2,098.9 76.3% Hillsborough $6,917.6 73.0% Bay $4,230.3 72.3% Florida‐Alabama $8,958.3 65.6% Lee $4,668.6 63.5% Polk $6,505.6 65.3% Ocala‐Marion $781.8 59.2% Brevard $935.4 57.4% Charlotte‐Punta Gorda $716.6 53.6% Pasco $1,644.4 51.4% First Coast $3,166.8 47.2% Hernando $498.9 47.1% Collier $2,103.2 41.4% Lake‐Sumter $683.3 38.9% Capital Region $1,066.5 38.8% Volusia $717.7 35.6% Sarasota/Manatee $983.9 26.6% Broward $2,245.0 24.2% Palm Beach $1,565.0 22.2% Miami‐Dade $3,260.6 14.3% METROPLAN Orlando $1,244.5 12.7% Pinellas $741.1 9.4% Indian River ‐$19.8 ‐2.3% 8  Total $62,472.5 42.9% 9  10  This circumstance can be explained–in part–through pressures on both components of the 11  shortfall formula (needs minus revenues). Areas projecting relatively high growth rates anticipate 12  needing new, costly transportation infrastructure to serve growing parts of their region, placing upward 13  pressure on the transportation needs side of the formula. Urban areas with lower percentage shortfalls 14  tend to have enacted local sources of transportation funding, have experienced slower growth rates, or a 15  combination of the two. This allows infrastructure to “catch up” with already-completed development. 16  The shortfall disparity can be exacerbated by an absence of local sources of transportation revenue such 17  as fully-enacted local option gas taxes, relatively low transportation impact fees, or sales taxes enacted to 18  support transportation initiatives. 19  For example, Pinellas County voters have enacted a one-cent sales tax called “Penny for 20  Pinellas.” The sales tax, in concert with enactment of local option gas taxes and a relatively slow 21  population growth rate have limited the Pinellas MPO’s forecasted shortfall to only 9 percent. 22  Meanwhile, Escambia and Santa Rosa Counties (forming the Florida-Alabama TPO) have experienced
  8. 8. Alexander Bond and Jeff Kramer    8  1  the “perfect storm” of conditions that have lead to a 66% anticipated shortfall: few dedicated local sources 2  of funding, not enacting all available local option gas taxes and high projected population growth in 3  currently under-developed areas. 4  5  6  7  CONCLUSIONS 8  Several other states have attempted to quantify shortfalls. The Iowa state legislature mandated a study 9  that found a $27.7 billion shortfall over the next twenty years (2), although the study only included 10  roadway needs. The California Transportation Commission estimated a $13.9 billion annual shortfall 11  (3). Connecticut estimates a $3.1 billion shortfall over the next decade (4). It appears that Florida’s 12  shortfall is not out of line with other states, and may in fact be slightly lower per capita. Although $62.5 13  billion is a large gap to overcome through any single action, it can be “chipped away” through a concerted 14  effort over many years. All levels of government need to undertake both immediate and long-term 15  actions that enhance revenue and reduce costs. 16  One important result from this exercise has been a standardizing of financial reporting across the 17  state. Using the Florida MPO Advisory Council (the project’s sponsor) as a communication forum, 18  MPOs agreed to a number of important financial guidelines. Among the most important was a 19  synchronization of plan horizon years. Another important agreement was for each MPO to adopt a formal 20  needs plan. Finally, all MPOs in Florida agreed to more realistic definitions of transportation needs. This 21  guideline was sought because some MPOs included “needed” projects that were outsized, unreasonable, 22  or otherwise extremely unlikely to ever be built. 23  The sizeable gap in transportation infrastructure funding tends to grab media attention, and these 24  statewide shortfall estimates garner substantial print media coverage each time results have been released. 25  Increasing public awareness is an important step to bringing down the shortfall, as educated voters may 26  be more inclined to vote for a pro-transportation politician or vote in favor of a transportation initiative. 27  The results are also useful when communicating with elected officials at all levels. 28  Once the acceleration of the shortfall is halted, progress can be made toward eliminating the 29  backlog of projects planned for the community. However, the shortfall cannot–and should not–be 30  completely eliminated. It is healthy for there to be a small shortfall, since this indicates the region is 31  growing, diversifying, or branching into new modes of transportation. However, unmanageably large 32  shortfalls indicate that the region is under-investing in infrastructure, which may stunt economic and 33  population growth in the long term. 34  This methodology for estimating statewide shortfalls can be replicated in every state. In fact, 35  most states have less than a dozen MPO documents from which to extract information. The results of this 36  project and its predecessors have proven useful to MPO directors and statewide associations when 37  communicating with state and federal elected officials. State officials often have year-over-year crises to 38  address, and can benefit from an occasional reminder of the long-term view of the transportation funding 39  situation. A statewide shortfall can help decision-makers see how dramatic the shortfalls are, and direct 40  available resources toward urban areas. 41 
  9. 9. Alexander Bond and Jeff Kramer    9  1  REFERENCES 2  (1) Mierzejewski, Ed and Jeff Kramer, “Innovations in Long Range Transportation Planning: 3  Observations and Suggestions.” Transportation Research Record: Journal of the Transportation 4  Research Board Volume 1858, 2003. 5  (2) Iowa Department of Transportation, “A Study of Iowa’s Current Road Use Tax Funds and Future 6  Road Maintenance and Construction Needs.” Publication No 4700. February, 2006 7  (3) California Transportation Commission, “California Transportation Commission Transportation 8  Funding Shortfall.” August 2004. Available from 9 10  (4) The Road Information Program, “Preserving Connecticut’s Highways and Bridges: The State’s 11  Challenge in Maintaining its System of Roads, Highways, and Bridges.” Washington, DC: TRIP. 12  2008.